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Monday, September 12, 2011 11:11 AM

IMF Officials say Troika Expected to Approve September Greek Loan Tranche; Papandreou, IMF Clearly Delusional; Greek 1-Year Bond Yield Hits 139%

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The humane thing to do to a rabid dog is put it out of its misery. The humane thing to do to Greece is the same.

Instead, officials in Germany, the EU, and IMF insist on putting Greece through another round of austerity measures inhumane torture in return for "one more" tranche of money.

Disgustedly, but not at all unexpectedly IMF officials say Troika Expected To Approve Greek Loan Tranche This Month

Greece's creditors are expected to give the thumbs-up for the disbursement of the next tranche of its 2010 bailout pact later this month after the Greek government announced new taxes to cover a EUR2 billion revenue shortfall, said two senior International Monetary Fund officials familiar with the matter.

The IMF officials, who have direct knowledge of the talks, warned, however, that this was Greece's last chance and that the scheduled December installment would be more difficult to arrange unless budget targets are met.

The Greek government and its so-called troika of creditors--the IMF, European Union and European Central Bank--are scheduled to meet again this week to discuss the payout of the next EUR8 billion tranche amid worries in financial markets that Greek austerity steps so far haven't met the troika's conditions.

The two IMF officials dismissed speculation of an impending Greek default or exit from the euro-zone. But they said Greece nonetheless remains the biggest problem for the common currency and that it is imperative that Athens follows up on its promises to cut down the public sector and tackle tax evasion.

The IMF officials said allowances must be made for the harshness of Greece's recession. This contrasts with ultimatums from some of its euro-zone partners, with Germany in particular warning that this month's next payout to Greece from its bailout agreement would be withheld if Athens failed to close a widening budget gap.

Finance Minister Evangelos Venizelos Sunday imposed a new property tax over the next two years to cover the EUR2 billion revenue shortfall, in line with a promise to Greece's creditors in exchange for receiving fresh aid.

Without the aid, Greece will run out of cash within weeks, according to senior Greek officials.

Greece has been reluctant to take new austerity measures that it said would deepen a recession the government blames for its inability to meet this year's deficit target of 7.6% of gross domestic product. It forecasts a deficit of around 8.2% of GDP, and argues that existing measures are enough to close the gap. The troika sees the deficit at 8.8% to 9% this year and asked Greece to for fresh austerity moves.

"I think this is Greece's last chance," the first official said. "If promised reforms are not implemented by the next review in December, things for Greece will become much more difficult with the next loan tranche far from certain. The Greek government knows that emergency measures like new taxes can only get them to a point before the population reacts in a dramatic way. They need sustainable measures with a smaller public sector where everyone is paying his fair amount of taxes. Only then the country can return to a sustainable path."
Taxes on the Dead

Raising taxes on the dead cannot possibly help. Yet, that is precisely what Germany, the IMF, and the EU want Greece to do.

Papandreou, IMF Clearly Delusional

Papandreou is not only willing to go along with the program, he gave a "we need to get with the program, rally speech" based on it. Papandreou effectively said "I am pleased to announce we are going to raise your electric bills so we can bail out French and German banks."

Papandreou is delusional and so is the IMF. There is no conceivable way hiking property taxes can help Greece.

The real world seems to agree.

Greece 1-Year Government Bond Yield

Mike "Mish" Shedlock
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